Monthly Issue
From Home Furnishing Business
March 12,
2018 by Jane Chero in Business Strategy, Industry 
Retailers who sell the category more than just occasionally are likely to find their average tickets regularly increasing, and the number of walk-offs and be-backs regularly decreasing. When sold as part of a seating group, a set of end tables or a coffee table can round out that perfect room package. Or when sold individually, occasional pieces can be effective cash-and-carry items for the consumer who is reluctant to pull the trigger on a whole room of furniture, or isn’t in the market for that.
Not only are there styles, shapes and sizes for virtually every taste and budget, but the occasional category has come to mean a lot more than end tables and coffee tables in recent years. Of course, the three-pack table group isn’t going anywhere, but the category today also includes sofa tables, console tables, benches, magazine racks, bar cabinets, and even small writing desks.
And if the recent Las Vegas Market is any indication, many vendors of occasional furniture are becoming more aggressive with their product roll-outs. Many are adding significantly to their SKU count, expanding their assortments and devoting more showroom space to the category.
Zuo, for example, opened a new Las Vegas showroom that is dominated by offerings from its new Zuo Décor division, which includes occasional furniture and home décor products such as wall hangings and knick-knacks.
And Coaster, long a powerhouse in the occasional category, doubled down on its successful licensed collection with the Scott Brothers of HGTV fame by adding 250 SKUs to the Scott Living lineup, including dozens of new occasional pieces.
The Scott Living collection, in particular, includes a variety of styles and has no single style theme, particularly in occasional. And that’s consistent with research conducted recently by Impact Consulting Services, parent company of Home Furnishings Business.
The survey of recent purchasers of occasional tables showed that almost one-third (32.47%) purchased a table with traditional styling, and the identical number purchased contemporary.
No other style category came close. Country/rustic was the third highest at 15.58%, while country/European was purchased by 9.1%. Mission/shaker were each purchased by 5.19%, while cottage styling wasn’t named by any survey respondents.
And when it came to the type of table purchased, end tables led the way, being purchased by 54.55%. A coffee table was purchased by 38.96% of respondents, and a sofa or console table was acquired by 23.38%. (Multiple answers were allowed.)
The only other type mentioned was nesting tables, which were purchased by just 5.19% or respondents.
When asked how much they would expect to pay for an occasional table group if purchasing today, 44.16% of respondents said $250 or less. Another 32.47% said $250 to $499, while 18.18% said $500 to $999. Only 5.19% said they would expect to pay $1,000 or more.
Survey respondents weren’t too sold on the importance of packaged offers when purchasing occasional tables, such as bundling a coffee table and two end tables for a single price. On a scale of 1 to 7, with 7 being “very important” and 1 being “not at all important,” the average response was a meager 3.61. In fact, nearly one-quarter (23.38%) of respondents rated it a 1.
An equally lukewarm response was given when respondents were asked the likelihood of buying a coffee table with extra seating, such as a model with stools that tuck under it. On a scale of 1 to 7 with 1 being “not at all likely” and 7 being “very likely,” the average response was only 2.87. More than one-third (36.36%) rated it a 1.
March 12,
2018 by Jane Chero in Business Strategy, Industry
Buoyed by an HGTV show that showcases their down-to-earth personalities and practical style preferences, Drew and Jonathan Scott charged onto the home furnishings scene a year ago with a 400-SKU collection that become an instant hit at Coaster.
This year, the twin brothers are back with an additional 250 SKUs that was a hit at the recent Las Vegas Market, as buyers again crowded into the expansive Coaster showroom to marvel at the expanded Scott Living lineup and get a selfie with the brothers.
The product additions feature a mix of materials, textures and finishes focusing on natural and organic roots as well as mixed media with an industrial flair and a clean and sleek contemporary look. The collection includes a variety of pieces that allow buyers an opportunity to create finished rooms or find a unique piece to add to their existing décor.
Dining room sets retail at $599 and up, five-piece bedroom sets start at $2,499, sofas open at $699 and accents start at $199.
But the Scotts didn’t stop there. They also ventured to the Restonic showroom in Las Vegas to take more selfies with buyers and unveil the Scott Living mattress line. It features innerspring, hybrid and latex sleep sets that retail from $1,099 to $2,199.
Just like their hit TV show, “Property Brothers,” the Scotts aren’t afraid to get their hands dirty when it comes to designing furniture and mattresses. They say they’re heavily involved in the entire development process, and it’s more than just their name on the carton.
“We are thrilled our collection with Coaster has continued to grow and remains one of the most popular home furnishing collections available,” Drew said.
During their visit to the Coaster showroom, Drew and Jonathan took a break between selfies and sat down to chat with Larry Thomas, senior business editor of Home Furnishings Business.
Home Furnishings Business: Why has this line been so successful?
Drew: Everyone who has watched our shows over the years knows that we hold dear our principles of helping families. So when you take what you see on our shows and you push that into our different collections with Scott Living, I think that’s what gets people really excited.
Jonathan: We try to think about how real families, real homeowners will use all of our products. We get a half-million messages a week each from of our fans on social media…and they tell us what they’re looking for. We’re trying to push the boundaries so people can get a little bit more, but at the same time, give them stuff that’s going to last.
Drew: Also, I don’t know if you saw the fine print on the box, but it says ‘free kitchen renovation with every furniture purchase’.” (laughter)
HFB: Are you trying to reach the interior design community with this line?
Jonathan: We work with local designers in every community we go to. And a lot of their clients feel that a lot of the beautiful stuff they see out there is not within reach. We’ve said to them, we can give them the quality, we can push the boundaries of design, keep people on trend and still make it attainable for the average family. We’re trying to bridge that gap between what designers want and what consumers want….and I think we’ve successfully done that.
Drew: We never want someone to look at something a family would love to have in their home and never be able to attain that. So, Scott Living is something like you will see on our show. We really know how to stretch a budget, and we know how to give you that wow factor and that function you need.
I think one thing people are starting to realize, as they look at us as designers, is that design doesn’t have to mean extremely expensive. It doesn’t mean that you have to break the bank just to have a beautiful piece of furniture in your home.
Jonathan: Drew’s shoe collection, on the other hand, that is really expensive. (laughter) But I think we’ve really raised the bar, and by watching shows on HGTV, (homeowners) have really raised the bar with their expectations, so you have to jump high these days if you’re going to get over that bar.
HFB: Are you pleased with the reception so far to the line?
Drew: What means a lot to me is that, when we’re at market, we have industry people, industry experts, coming up to us and saying you guys are changing the mold; you guys are breathing fresh life into the furniture and décor design world. That’s what excites me. And we see that on the consumer side when they’re buying our product.
If you ever buy one of our products, post a picture of it in your space, hashtag ScottLiving, because we will engage with you. We will interact with you. We want to see how you’re using it.
Jonathan: It’s all about the little details (such as) technology and storage. All of these little things, we try to infuse in the style.
To see a video of the full interview, go to http://hfbusiness.com/Magazine/Videos.
February 13,
2018 by Jane Chero in Business Strategy, Industry
That belief has sustained manufacturers and retailers for decades. Now for furniture store owners, confidence is failing with each year’s decline in traffic.
Furniture Stores, for the most part, merchandise the furniture consumer durables leaving the non-durables, such as top of bed and window coverings, to the Home Furnishings Stores. The consumer durables account for 39% of the total furnishing sales, a $305 billion market.
This was not always the case with furniture stores merchandising a full range of products for the home. However, over the years product categories have been abandoned as the “category killers” pursued a product with low service, low prices and sometimes quality. How could a furniture store compete with Bed Bath and Beyond?
Retailing has always been a situation of opportunity. The consumer doesn’t always make a destination purchase, but discovers something she cannot live without in the process of “shopping” commonly referred to as aimless wandering.
With the time strapped consumer, the concept of retail therapy has all but disappeared with Generation X and younger Baby Boomers. It is well documented that Millennials hate to shop except digitally. What does this mean to the small independent furniture store that presents product in a pleasant environment stocked with knowledgeable sales staff? It means “waiting for them to come.”
The quandary that the industry has is the growth of the home furnishing industry in total (8.1%) versus the growth of furniture stores (1.5%) in 2017. While home furnishing stores are increasing their share of furniture sold, furniture stores are not increasing or even participating in the sales of the non-durable product categories. While furniture and bedding has enjoyed a 21.8% increase over the last 5 years, many of the non-durable categories have achieved more growth.
It may not be just the opportunity to sell additional product categories but the opportunity for exposing the furniture product. The commitment to shop for new bed linen or even a rug is much less than the commitment to redecorate your home. The question is, how many consumers buy furniture while in the process of shopping for bed linens?
Many things can happen to the consumer on the way to redecorating their home. One of these may be discovering that great piece while shopping for something else in a Home Furnishings Store.
Do we need another reason(s) for consumers to visit other stores?
February 13,
2018 by Jane Chero in Economic News, Industry
Since the turn of the century, diversity in America has continued to grow – impacting the political climate, education and the economy. One common thread in the home furnishings industry is that all Americans need and purchase home furnishings, regardless of ethnicity. However, understanding the components of diversity adds perspective to our retail landscape.
In the timeframe of six years 2010 to 2016, the U.S. resident population grew 4.7 percent – from 281.4 million to 323.1 million. As shown in Table A, all races grew in number but only White (Non Hispanics) have lost share of the population.
Census Bureau Race Classifications
White (Non Hispanic) encompasses Europe, the Middle East, and North Africa. Per the Census Bureau classification, people from the Middle East are considered White. There are an estimated 3.6 million Arab-Americans in the United States, but that doesn’t include other ethnic groups that could put the total Middle Eastern and North African population above 10 million. According to the Census Bureau’s American Community Survey about one million people from the Middle Eastern region are first-generation immigrants to the United States.
White Hispanics are not considered a “race” by the U.S. Census Bureau but an “ethnicity”. For the purpose for this report, White Hispanics have been broken out into its own classification.
Asians include persons from the Far East, South Asia, and Asian Indian.
Other race or ethnic classifications are Black/African American, American Indian or Alaska Native, Native Hawaiian Island or Other Pacific Island, and 2 or More Races.
Population Growth by Race or Ethnic Group
Whites (Non Hispanic) represent 61.1 percent of the population in 2016, down from 69.1 percent in 2000 and 63.9 percent in 2010. Meanwhile, White Hispanics already surpassed Blacks and African Americans in number by 2010 as the second largest ethnic group. In 2016 White Hispanics grew to 15.6 percent of the population compared to 13.3 percent for Blacks and African Americans. Asians, the fastest growing ethnic group in the U.S., grew from 3.6 percent to 5.7 percent of the population in 2016 (Table B).
The U.S. added 14.4 million additional residents between 2010 and 2016. By far, White Hispanics added the most at 5.9 million followed by Asians at 3.2 million, and Black/African Americans at 2.7 million. Of note is that while mixed-race persons represent only 2.6 percent of the U.S. population, in the six-year period they grew by an additional 1.5 million persons. Meanwhile, Whites (Non Hispanic) added just 643,174 residents to the total population in six years (Table C).
As shown in Table D, the contribution to population growth 2010 and 2016 came primarily from the White Hispanics, 41.2 percent of the total. But the one-year growth rates in 2010 to 2011 and more recently 2015 to 2016 illustrate the growing contribution of Asians to the population who represented 14.8 percent of the growth 2010 to 2011 but jumped to 23.9 percent 2015 to 2016.
The 14.4 million new residents to the U.S. population 2010 to 2016 account for an overall 4.7 percent growth as shown in Table E. Persons of 2 or more races was the fastest growing category increasing 21.4 percent to a total of 8.5 million residents or 2.6 percent of the population. Asians, at only 5.7 percent of the population in 2016, increased 20.8 percent in the six-year period and White Hispanics grew 13.3 percent. Whites (Non Hispanic) and Blacks/African Americans experienced the lowest growth at 0.3 percent and 6.8 percent respectively.
Natural Increase vs. Foreign Immigration
A resident population grows by two methods: (1) Natural Increase, which is the net result of births minus deaths, and (2) Net Foreign Immigration. Of the 14.4 million additional residents over the six-year period since 2010, 59.3 percent of the growth can be attributed to Natural Increase and 40.7 percent to Foreign Immigration (Table F).
Natural Increase
For the White (Non Hispanic) population, Natural Increase (births minus deaths) has been negative since the early 2000s meaning more have died than were born. Between 2010 and 2016, Whites (Non Hispanic) experienced a net natural decrease of 397,697 residents. As the aging Baby Boomers continue to die in record numbers and younger Millennials delay childbirth, this decline is expected to escalate.
By far, the much younger White Hispanic population has the greatest net result of births minus deaths accounting for over half of the Natural Increase of the total population occurring between 2010 and 2016 (Table G).
For the six-year period, the Birth to Death Ratio (the number of births per death) totaled 1.5 for the entire United States. Both younger ethnic groups in the U.S., the White Hispanic population and Asian population have much higher rates of births versus deaths – 5.8 and 3.4 in a six-year period (Table H).
The impact of the aging White (Non Hispanic) population is shown in Table I. Whites still represent 61 percent of the population and 50.1 percent of all births. However numbers of deaths are overwhelming among Whites (Non Hispanic) totaling 78.8 percent of all deaths 2010 to 2016. This negative Natural Increase trend among Whites (Non Hispanic) is expected to continue for years to come. Meanwhile, the younger White Hispanic group 2010 to 2016 represented 22 percent of all births, but only 5.7 percent of deaths.
Net Foreign Immigration
Net Foreign or International Immigration accounts for 40 percent of the population increase 2010 to 2016 growing the U.S. population by 2 percent. During that time foreign immigrants added an additional 5.8 million people over six years. In 2016 alone the U.S. experienced a Net Foreign Immigration of almost one million (999,163 persons) compared to 703,824 in 2011.
White Hispanics represented the largest chunk of immigration in the early part of this decade representing 46.4 percent all Net Foreign Immigration in 2011. However, by 2016 that number had fallen significantly to 24.1 percent.
The biggest growth in Net Foreign Immigration has come from Asians who represented 24.3 percent of all immigrants in 2011 but 39.9 percent in 2016. In the six-year period, 2.3 million Asians immigrated to the U.S. compared to 1.3 million White Hispanics, 1 million Whites (Non Hispanic) and 851,355 Blacks. Table J shows the percentages.
For furniture and home furnishings retailers, the broadening ethnic diversity of U.S. households presents unique opportunities for products that address the cultural tastes and preferences of these new residents.
February 13,
2018 by Jane Chero in Business Strategy, Industry
In fairness, most of the advertising in the furniture sector is executed by the retailers which should be event oriented. Retailers allocate a percentage of their advertising dollars to building brand. However, the majority of the spend is to attract those consumers that are actively shopping. Therefore, the significant advertising expenditure is targeted to 11.45% of the consumers based upon FurnitureCore’s (the research arm of Home Furnishings Business) ongoing marketing intelligence.
The major challenge in furniture retailing today is the declining traffic. In 2017, traffic declined 5%. Even though sales increased 3.4% according to Impact Consulting, parent company of Home Furnishings Business). The decline in traffic doesn’t mean less consumers in the market but just less store shoppers. As has been documented by the research, the average number of stores visited by each shopper is just over two stores.
The accompanying table illustrates these findings by age group. Of significance is that older consumers (over 45) limit their shopping to even less stores.
This situation of less traffic raises an interesting question: What about be backs and personal trade? Typically, the sales associate closes the sale on the first visit 20-30% of the time and then on the second visit 60-70%. For a sales associate, the higher the ‘be backs,’ obviously the higher the close rate.
The percentage of ‘be backs’ is influenced by the merchandise price point. The higher, the more ‘be backs.’ The average for an upper/premium store would be in the 30% range and middle would be in the 20% range. It is a great KPI to measure a retailer’s “sales associate” to see how they are developing the client relationship. An interesting read is the Coach’s Corner article in HFB Dec., 2017 issue — So Why Else Do Customers Leave Without Buying?
The furniture purchase is triggered by a life event such as a move (27%) or a remodeling/addition (16.8%). The graphic presents the occurrence factors by generation
Therefore the conclusion is that we wait for the lifestyle event to occur and then we are ready with a “sale.”
Obviously, we can take that approach but what about those consumers that are interested by no specific plans (28.63%) and those that are beginning to shop (39.26%)? These consumers should be our prime target for advertising because when they start the shopping process it is just under 50% finished and done within two weeks as can been seen in the graphic.
No matter the age or income, it’s a fast process.
When the consumer begins the process, they start with a list of retailers that they will consider. Often referred to as brand awareness, it is a perspective in the consumer’s mind of who they want to consider. The accompanying graphic illustrates a very competitive market with several long time retailers along with several new entrants (less than two years). Shown with the traditional retailers are the other distribution channels. Yes, they are in the consumer’s considerations.
Just because the retailer is considered doesn’t mean that they make the short list. An Important measure is considered, not shopped, which indicates the impact of the most recent messaging.
The advertising challenge for retailers is to create that ongoing awareness in the consumer’s perception.
There are many media choices available to the retailer to influence the consumer. Choosing the correct media to influence the consumer in the various stages of the buying process is the challenge. The table below presents the influence of each media type by generation.
But before we discuss how to influence the consumer that is committed to purchasing, what about those that are considering a purchase? At the beginning of each year, Impact Consulting surveys consumers on a national basis (demographically balanced sample) about their intention to purchase furniture. This is one of the factors used in their forecasting model. The response is typically an affirmative plan to purchase in the 65-85% range dependent upon the economy and consumer confidence at the time of the survey. As a follow up, a year later they ask the same consumers if they acted on that intention. Unfortunately, less than a third act on their plans to purchase furniture.
Furniture is a major purchase and daily occurrences can impact consumer’s purchasing plans. As we write, I am sure that many sofas lost out to that replacement snow blower. However, that is not the only problem. The industry has not made our product a priority. The table below provides some input by generation.
This is where the manufacturer/supplier comes into the picture. We have discussed at length the absence of branding in the industry currently.
Shelter Magazines at one time communicated the prestige/quality of iconic brands like Henderson, Drexel, and many others. The potential for Stickley, Brown Jordan, and others to excite the consumer exists. Retailers respond to those vendors that encourage the consumer to walk through the door and ask for a specific brand.
It has been fixed in the industry mind that over 70% of consumers visit the internet to conduct research during the shopping process according to FurnitureCore research. Interestingly, almost 40% go to the store first. The table illustrates that first stop in the buying process by generation.
Interestingly Generation X, the current prime target for furniture retailers, do research in the magazines (10.8%). This is the rationale behind the magalogs that Home Furnishings Business produces for retailers, which last year resulted in 9%+ of all recipients visiting and making a purchase.
The cost of advertising is a major part of the traditional furniture industry expense structure. While the overall industry is above 7%, there are many retailers expending 8-9%, a level that is not sustainable. High performance retailers achieve a 6-6.5% range as illustrated below for those retailers.
As can be seen from the table, the breakdown by media type still favors television. As can been seen from table D, only 12.9% is influenced by this media type. Long term, this media type will lose influence as can be seen from the response of the millennials (8.5%).
With advertising cost increasing as a percentage of sales and the cost per opportunity (up) accelerating to $30/up or $100/sale at 8% of the average sale ($1,250) the bottom line is challenged.
Additionally, adding the 3-4% of the cost for the financing — the offers that many believe critical for traffic — even though on average less than 35% avail themselves of the offer.
On top of this is the ever increasing cost to attract and retain good sales associates which can easily reach 7%.
With the above, the furniture retailer is running out of runway for profitability.
The answer is to measure the results and target your customer. If your market is in Columbus, Ohio, there are 738k households headed by consumers over 25. A middle/upper retailer targets 476 households. When the analysis is done of the psychographics (lifestyle), focus of the retailer number goes below 250. Let’s shoot a rifle instead of a shotgun.